Patents, Secrets, and the First Inventor Defense

32 Pages Posted: 17 May 2001

Multiple version iconThere are 2 versions of this paper

Date Written: March 2001


We analyze optimal patent design when innovators can rely on secrecy to protect their innovations. Secrecy provides a temporary monopoly, which terminates when the secret leaks out or the innovation is duplicated. We find conditions under which the optimal policy is to induce the first innovator to patent. Furthermore, we derive the optimal scope of the rights conferred to late innovators. We show that if the patent life can be suitably set, broad patent protection is optimal: late innovators should be allowed to patent and exclude first inventors who have relied on secrecy.

Keywords: Patents, Trade secrets, Intellectual property

JEL Classification: K11, O34, L00

Suggested Citation

Denicolo, Vincenzo and Franzoni, Luigi Alberto, Patents, Secrets, and the First Inventor Defense (March 2001). Available at SSRN: or

Vincenzo Denicolo

University of Bologna ( email )

Strada Maggiore 45
Bologna, 40125

Luigi Alberto Franzoni (Contact Author)

University of Bologna ( email )

P.zza Scaravilli 2
Bologna, 40124
0512098488 (Phone)
+39-051-221968 (Fax)


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